In this blog I will list some of my top Quora answers for the last few days, which focused on many interesting subjects.
In the answers shared today I focused on:
- People were scared at the start of the 2020 coronavirus pandemic. In March, April and May, many people were therefore asking which investments would be profitable during the coronavirus pandemic. What has been the result of these predictions, and which kinds of investment portfolios have done well this year?
- If somebody is starting off with $0, how can they become a millionaire? Which skills are needed? Should somebody only focus on money making skills, or also money management abilities?
- Is Japan, and indeed Tokyo, really an expensive place to live or is that a misconception? Also, does it depend where you live in Japan?
If you want me to answer any questions on Quora or YouTube, or you are looking to invest, don’t hesitate to contact me or use the WhatsApp function below.
What are some investments that can be profitable during the COVID-19 pandemic?
I do think one thing has changed due to the crisis – more on that below. First though, it has to be mentioned that this question was asked over 6 months ago now.
Many people below, as usual, were encouraging the fear trades. For example, “just keep your money in the bank until a vaccine is found”. “Wait and see”. “This time is different”.
Some people back in April and May were also suggesting that investing in certain industries, like healthcare, made sense.
What has happened since many of these answers were written?
- The S&P500 has gone up 80% since it’s worse point
- The Nasdaq has more than doubled
- European and emerging markets have also done well, albeit not as well as the Nasdaq
- The world’s major stock markets had their best month since 1987 in November 2020. That is despite many people being terrified for months about the US Election, just as they were in 2016. Many stock indexes went up by more than 10% after the disputed US Election, and in spite of a second European lockdown, before rising again after the vaccine was found. This was the opposite result the media had been warning against. For months before the election, people were terrified of “uncertainty”.
- Somebody who invested on January 1, 2020, would be up about 10% year-on-year, even if they didn’t add money during the crash.
- Industries like healthcare haven’t outperformed others.
- Short-term government bonds once again outperform long-term ones and stocks during the worst of the crisis, showing that bonds still have a place in a portfolio.
- Once again, many people didn’t learn their lesson. Some people who incorrectly thought markets would never recover, were the same people that thought markets wouldn’t recover from 2008. The same thing who were terrified of investing due to the 2016, often didn’t learn their lesson in 2020. I have no doubt that the same people will still be thinking the exact same thing come the next market crash, election or unexpected event.
- On a long-term graph, the falls in 2020 don’t look so scary:
What was more scary is how so many people, once again, panic sold, in large part due to the media.
Some online do it yourself (DIY) brokers reported that up to 40% of their clients completely sold out when the price was low.
The bottom line is, old-fashioned asset allocation techniques worked during the crisis, and old adages like “you can never time the markets” or indeed predict them, has never been more true.
What is perhaps different these days are bond rates. Bonds are less volatile than stocks and at least the short-term ones do OK during a crisis.
The very low rates on offer, however, mean fewer investors are keen to hold them at all costs.
I suspect if bond rates were as high as they were in the 1980s, 1990s and early 2000s, stock markets could have taken 3–5 years to recover. We will never know that though.
I also think that after 2008, many people thought 0% interest rates, and low bond rates, were temporary.
Some central banks, like the US Federal Reserve, did eventually increase rates in 2018.
Yet most central banks have indicated that rates will stay at 0% for at least 5 years, and it seems unlikely that most developed countries will see interest rates above 2% for 10 years.
We might even be going into a “Japanese-style” situation where 0% interest rates are the norm.
That means to avoid inflation eroding savings, people will need to put money to work.
As an aside, you might say that this answer has been made with retrospect, but through the years my followers have always heard a specific message from me:
- Don’t panic
- Be diversified
- Don’t listen to the media
- Don’t time the markets. Nobody can know when they will recover from a crash.
It just happens that 2020 has shown that such advice really works even during an extreme time.
What skills would you learn for a year now to become a millionaire in the future?
If I was starting out fresh, with $0 tomorrow,I would keep it simple.
I would split this question into two parts – money earning and money management skills.
Being a millionaire means having $1m, Euros or Pounds in assets. If somebody earns a lot but spends just as much, that isn’t going to lead to wealth.
So these skills will help you not throw money down the drain
Money earning skills
This partly depends on a person’s skills, industry and many other things. For most people, the most productive money earning skills are:
- To get more skilled at what you already do. If you are a teacher and a Master’s Degree could open up some of the best international skills in the world, and therefore a huge pay rise, that is an obvious first choice. That is just one example of many I could use
- Anything to do with branding, marketing, sales or something which doesn’t just mean you are working harder to make more money. If you are earning $20 an hour, you will earn an extra $200 by working ten hours over-time. If you get good at some of these skills, you can earn much more, without working harder, once the initial research and education is over. Let’s give a simple example. Imagine somebody has been running their own business for 20 years. They are good at traditional marketing, which brings in leads and sales for the business. Yet it is time-consuming. If they can learn how to market online, they can instantly be shown to a bigger audience, and some techniques can just be scaled by reinvesting. Let’s say somebody is a dentist that sells courses online. The cost of the course is $500. $400 spent on Google Ads produces $500 in sales, so a $100 profit. In that situation, the budget can gradually be increased, and you can play around with wordings to increase the 22%+ profit rate.
Money managing skills
This means money coming out, or how you manage your investments. More specifically:
- Budgeting skills for personal finances, and basic accounting if you run your own business. If more money is coming in personally, or for your business, that doesn’t mean the profits are higher if you don’t know how to do this.
- Investing. If you can earn 6%, 8% or 10% from your investments, that will compound compared to 0% in the bank. A good wealth system works when your investments (personal and/or business) are doing well, and your income is rising faster than your costs.
Let’s put this another way. Businesses that are started by finance or sales people tend to do better, and have a lower failure rate, compared to founders that come from other industries.
The reason is simple. Businesses live and die by money coming in and going out.
The same is true in finances. Many people live according to their means, and not below their means, even if they are earning loads of money.
One of the easiest tricks is to be just as concerned by how much money is coming out, as coming in.
It is a bit like in sport. If you have the best attackers in the world, you could still lose if your defence or goalkeeper is shocking.
The defensive part is just less sexy and interesting for most people. The same applies in personal finance.
Many people are interested in the glory of having a huge salary, or making loads as a founder.
Few are as interested in their surplus – how much is left from that money after taxes and cost of living.
Is Japan expensive? If it is, then why are the salaries there so low?
It is relatively expensive but not like it was during the Bubble years. At that time, Tokyo was the most expensive city in the world.
I remember when I first arrived in Japan, I read a guide book which was 15 years out of date.
One thing I noticed was how the prices were updated, yet unlike almost every country, some prices used to be higher and seem to have deflated.
I then watched as some things became cheaper down the years. For example, when I first arrived in Japan, the taxi meter started at over 700 Yen for the shortest journey (Over $7). It was halved to improve demand.
So, things have changed after years of deflation and low inflation, but once people have an idea in their mind, it gets hard to change it quickly.
So, I think this idea that Japan is much more expensive than the average developed country will take another 20 years to shake off.
Now numerous cities in the US, Switzerland, Australia and the UK are more expensive.
To give some comparison, Tokyo is now about 60% cheaper than San Francisco for renting and over 40% cheaper for restaurants – Cost of Living Comparison Between
New York rents are said to be more than double those in Tokyo – Cost of Living Comparison Between .
Osaka’s rents are less than a third of New York rents, with some smaller towns and cities being 1/5 of the price.
So, if you come to Japan from most developing or even mid-income countries, it will seem super expensive or at least expensive.
It will seem normal or a little high compared to an “average” developed country, and cheap compared to some of the most expensive cities and countries in the world.
In terms of salaries, they aren’t lower than most developed countries, and it depends on the industry.
In many industries, they are average. If you work at PWC or Deloitte in Tokyo, you will make roughly the same as with the same firms in London.
Remember also that healthcare is much cheaper than in the US and a few other countries, and social welfare is higher – rightly or wrongly.
Moreover, even in Tokyo, there are cheaper options. Take this 300 Yen ($3) bar for example.
I could have given many more examples too, including $10 courses at lunch, or everything you can drink deals.
The cheaper end does exist in Japan to a larger extent than some cities in the world.
Japan, therefore, certainly isn’t cheap and can be very expensive for some things at the top end.
Times have changed though, and other cities and countries have become more expensive in the meantime.
If there is little or no inflation in Japan over the next ten or twenty years, like the last period, then it could become pretty average globally.
In the article below I focused on:
- What are the multiple reasons that people sell their stocks when the market crashes?
- Which investment strategies work out for most people long-term and which don’t?
- Why do many night-clubs and entertainment businesses go bust? Perhaps there could be an interesting reason few consider when answering such a question.
- Can high-income people fall into poverty, and what does the coronavirus tell us about that?
- Is saving money pointless, or is it just not as effective as investing the cash instead? Also, what mentality prevents people from savings or investing in the first place?
Click below to read more from my recent Quora answers.